Investigating Performance of Equity-based Mutual Fund Schemes in Indian Scenario

Abstract

In the backdrop of liberalization and private participation in the Indian mutual fund industry, the challenge to survive and retain investor confidence has been a prime are of concern for fund managers. For small investors who do not have the time or the expertise to take direct investment decision in equities successfully, the alternative is to invest in mutual funds. The performance of the mutual fund products become more complex in context of accommodating both return and risk measurements while giving due importance to investment objectives. In this paper, an attempt has been made to study the performance of selected schemes of mutual funds based on risk-return relationship models and measures. A total of 23 schemes offered by six private sector mutual funds and three public sector mutual funds have been studied over the time period April 1996 to March 2009 (13 years). The analysis has been made on the basis of mean return, beta risk, coefficient of determination, Sharpe ratio, Treynor ratio and Jensen Alpha. The overall analysis finds Franklin Templeton and UTI being the best performers and Birla SunLife, HDFC and LIC mutual funds showing poor below-average performance when measured against the risk-return relationship models.

Key Words: Mutual Fund, Sharpe Ratio, Beta, Treynor Ratio, India, Risk, Investor